The Federal Debt Is ... Shrinking?

The U.S. Treasury Department Photograph by Daniel Stein/Getty Images

The federal debt is exploding—except right now, when, believe it or not, it’s actually shrinking. The Treasury Department announced on Monday that the nation’s net marketable debt is likely to decline by about $35 billion from the end of March to the end of June.

Tax receipts are coming in above projections and spending is diminishing, Treasury said. It helps that the second quarter is typically the best of the year for budget-balancing.

The surpluses won’t last long. The Treasury Department projected borrowing of $223 billion in the third quarter, which begins by July 1.

Still, even a little black ink in the federal ledger is a beautiful sight. The government hasn’t run a quarterly surplus since 2007, right before the U.S. plunged into the deepest economic downturn since the Great Depression.

While the current quarter of debt reduction is a bit of a fluke, it does reflect a dramatic improvement in the federal government’s fiscal position. The budget deficit as a share of gross domestic product fell from 10.4 percent in 2009 to 6.7 percent in 2012, and it’s on track to get down to 3.7 percent in 2015, according to the median estimate of economists surveyed by Bloomberg.

The second-quarter debt pay-down postpones when the U.S. will bump up against the debt ceiling. Last week Steve Bell, senior director of economic policy at the Bipartisan Policy Center in Washington, said the ceiling might not be reached until mid-to-late September, vs. a previous estimate of late August to mid-September.

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